As we celebrate family day with our families, it also marks the start of another tax season. Taxes for families will be a mixed bag this year as a tax rate cut comes with a cut in tax credits too.
So, the big tax changes that will impact the tax bill for families are the following:
Middle Class Tax Rate Cut
The tax rate has been reduced from 22% to 20.5% for middle class earning individuals for the tax bracket for income between $45,282 and $90,563. This will not impact any tax payers that have an income below $45,282.
Tax Increase for High Income Earners
The tax rate has increased from 29% to 33% for all individual taxpayers making an income higher than $200,000. This tax increase has been made to compensate for the tax revenue loss that would be caused by middle class tax rate cut
Income Splitting Discontinued
The income splitting used to save up to $2000 for a lot of families with children where one spouse had income in a higher tax brackets as compared to the other spouse. This tax credit was extremely popular in families where one partner was making little and no income and the other partner was making most of the family income. The income splitting is no longer available for the 2016 Tax Year
Children’s Fitness and Arts Amounts Reduced
The fitness and arts amounts have been reduced by 50% for the 2016 Tax Year. The maximum eligible fitness amount is $500 for the 2016 tax year whereas the maximum eligible arts amount is $250 for the year. The fitness and arts amounts have been discontinued starting 1st January,2017 and will not be available for the 2017 tax season.
So overall, if you are couple with no children and making similar incomes, you will be most likely paying less in taxes this year unless you make more than $200,000.
If you are family where only one spouse was working and you were spending money on fitness and arts activities for your children, you might end up paying more or about the same in taxes depending on your income information.
If you are a family where one spouse makes more than $200,000 and the other spouse was not working and you used to take advantage of the arts and fitness amounts for children, the tax bill will be significantly higher this year as you pay a higher tax rate with no income splitting or fitness and arts credits.
Visit a Softron Tax location today to call 905-273-4444 for an appointment to plan and file your taxes with an expert